PepsiCo Stumbles as Restaurant Sector Stalls

Shares of beverage giant PepsiCo Inc. fell for the third straight day Thursday to their lowest level since January as Wall Street analysts predicted lower profits at the firm’s restaurants, including Irvine-based Taco Bell.

“The whole restaurant business has been a challenge for Pepsi,” said Douglas Christopher, an analyst with Crowell, Weedon & Co. in Los Angeles. “Taco Bell has been a problem since 1994.”

Douglas, who closely follows PepsiCo, said specialty menus such as Taco Bell’s low-fat Border Lights have not generated the sales that the chain had hoped for.

Mark Cohen, an analyst with Goldman Sachs & Co., removed PepsiCo from his recommended list, saying he expects disappointing sales to continue at the company’s Pizza Hut and Taco Bell chains.

Although considered a soft drink firm, PepsiCo received nearly 40% of its sales, or $11.3 billion, from restaurants last year, Douglas said. Taco Bell represented about a third of that amount, or $3.5 billion in sales, he added.

Last month, PepsiCo said second-quarter sales at its restaurants declined 2% from a year ago. Sales at Pizza Hut restaurants open at least a year fell 13%, while sales at Taco Bell stores open at least a year were off less than 1%.

Comparisons of outlets open at least a year, known as same-store sales, are considered the most accurate assessment of a restaurant’s performance.

KFC was the lone bright spot, with an 11% rise in same-store sales.

PepsiCo spokesman Richard Detwiler Jr. said the company expected third-quarter profits at Pizza Hut and Taco Bell to be flat, but instead are down slightly.

PepsiCo stock fell $1.375 a share Thursday, or 4.6%, to $28.625 on the New York Stock Exchange. More than 14 million shares changed hands, by far the most actively traded issue on the NYSE and well above the company’s average daily volume of 3.8 million.

That followed losses of 62.5 cents on Wednesday and $1 on Tuesday, with heavy trading on both days.